IRON ORE PRICES SET A NEW RECORD

Posted 21 August, 2020

The Argus 62% reached $ 127.6 per tonne and the Argus 65% reached $ 134.8 per tonne. These are the highest levels since 2014.

 

The rise in prices in recent months was influenced by the stimulus measures from the Chinese government. They were launched in March 2020 after iron ore prices collapsed to $ 80 per tonne due to the negative impact of the coronavirus. The price of iron ore is in direct proportion to the Chinese economy - the PRC is the largest consumer of iron.

 

The current situation with the coronavirus in Brazil has also influenced the price increase, with more than 3.5 million infections recorded there. The rise in the number of cases and restrictive measures in the country hit the global supply, as Brazil is one of the largest producers of iron ore.

 

Beijing has poured hundreds of billions of yuan into the economy, most of which went to infrastructure. This has played an important role in the revival of economic activity. According to customs data, China imported a record 112.6 million tons of iron ore in July. This is 24% more than last year and 10.8% compared to June.   

 

Experts of the Australian bank ANZ believe that the rise in prices may not continue. Prices will normalize as soon as the seasonal decline in construction activity begins.

 

The American rating agency Fitch Solutions said prices will remain high until 2021, followed by a slight decline.

 

The rise in iron ore prices will also affect Russian steelmakers, but in different ways. Severstal is self-sufficient in ore and has a surplus that it sells and therefore benefits from higher iron ore prices. NLMK has a balanced situation, the company is fully self-sufficient in ore and changes in spot prices do not affect financial performance. But MMK is not fully provided with ore and buys a significant amount. The rise in iron ore prices has a negative impact on the company's financial performance.

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